MNO Ltd purchased a one-year insurance policy on 1 April. The entire premium of $6000 was recorded
Question:
MNO Ltd purchased a one-year insurance policy on 1 April. The entire premium of $6000 was recorded by debiting prepayments. Year-end is 30 June.
1. Give the 30 June adjusting entry.
2. What amount should be reported in the 30 June balance sheet for prepayments?
3. If no adjusting entry was made on 30 June, by how much would net profit be overstated or understated? Would assets be overstated or understated?
4. What would your adjusting entry in question 1 be if the premium of $6000 was recorded by debiting insurance expense?
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Step by Step Answer:
1 To determine the 30 June adjusting entry we need to calculate the amount of premium that has been ...View the full answer
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Related Book For 
Financial Accounting An Integrated Approach
ISBN: 9780170349680
6th Edition
Authors: Ken Trotman, Michael Gibbins, Elizabeth Carson
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